As Interest in Russian Oil Exports to India Grows, New Highs May Be Hit

India’s oil processors are willing to buy more Russian crude if the price is right, said refinery executives, potentially providing a bigger outlet for Moscow almost a year after its invasion of Ukraine.

The South Asian nation increased Russian oil imports in 2022, ending the year with record monthly volumes. Executives said more cheap crude may be available to India from early next month, with a European Union ban on seaborne Russian fuel shipments possibly weighing on refining rates in the key OPEC+ producer.

The four-week moving average of crude shipments from all Russian ports has increased in recent months. This is due to the fact that Russia has been ramping up its crude production in order to meet global demand.

India and China have become a crucial destination for Russian oil after many others shunned shipments due to the war in Ukraine. Indian refiners are able to turn cheap Russian crude into fuels such as diesel and then sell to regions including Europe, boosting profit margins for processors. The impending EU sanctions are expected to ratchet up demand for fuels from Asia, making India and China even more important partners for Russia.

"There's a bit of a circular trade going on as India takes Russian crude that Western buyers don't want and refining it into products for resale to the West," said Mukesh Sahdev, the head of downstream oil trading at Rystad Energy.

India's crude oil imports rose to a record last year, although increased buying of Russian barrels has crimped flows from OPEC. According to government data, cartel members accounted for about 62% of total oil imports from April to December, compared with around 71% in the previous corresponding period.

The refinery executives said that Indian processors will continue to source their long-term supplies from producers such as Saudi Arabia, with any increase in Russian purchases done on a spot and opportunistic basis.

Russian fuel oil exports to India have surged in recent months, almost doubling from December to 137,000 barrels a day, according to data from Kpler. The product can be used to upgrade other more valuable fuels or be used in power generation. This increase in exports is a positive sign for the Russian economy.